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>> this is nbr. captioning sponsored by wpbt >> tom: i'm tom hudson. susie is off tonight. federal reserve boss ben bernanke shows signs that the central bank will continue buying government bonds to help support the economy. the housing recovery continues building ground, with new home sales and home prices hitting multi-year highs. and the banking business may have fewer employees, but wall street bonuses are up, rising nearly 10% on average. tonight, a closer look at banking jobs. that and more tonight on nbr! the federal reserve strategy of buying government bonds to help the economy will continue. that was the capitol hill testimony today from the central
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bank's chairman, ben bernanke. in recent weeks, fed officials have raised worries about the strategy, but bernanke offered a strong defense for the program that's aimed at keeping interest rates low. the risks, he said, were manageable. hope the fed would continue its easy efforts to stimulate the economy had u.s. markets seeing green. the dow gained 116, the nasdaq is up 13, and the s&p rose nine. washington bureau chief darren gersh has details on the fed chairman's strong defense of his aggressive policy to support the economy. >> reporter: sure, there are risks when the federal reserve is buying almost $3 billion worth of bonds every day. but chairman ben bernanke told congress basically, "we got this." >> although a long period of low rates could encourage excessive risk taking, and continued close attention to such developments is certainly warranted, to this point, we do not see potential costs to the increased risk- taking in some financial markets
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is outweighing the benefits of promoting a stronger economic recovery and more rapid job creation. >> reporter: with unemployment stuck around 8% and inflation subdued at 1.5%, there are no economic red lights flashing. so bernanke gave no signals he was ready to change course or back away from his aggressive program to get the economy back to a more normal level of output. still, the fed chairman did reassure lawmakers he understood aggressively buying bonds to keep interest rates low was not a magical economic elixir. >> i think the purpose was to, number one, make people aware that he's aware of the costs and, number two, that he is not worried about the cost. >> reporter: overall, the fed chairman seemed more comfortable and assertive in defending his policies. he challenged senators when they had their facts wrong, and he was confident the fed could both boost job creation and keep inflation under control. >> you called me a dove. well, maybe in some respects, i am, but on the other hand, my inflation record is the best of
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any federal reserve chairman in the post-war period, or at least onef the best-- about 2% vera inflation. so we have worked on both sides of the mandate, and we're trying to achieve a stronger economy for everybody. >> reporter: and for now, at least, markets believe bernanke can keep his inflation-fighting streak alive. >> that is something that is worth pointing out to the critics that say the fed is creating all sorts of inflation pressures. for the moment, there is no evidence of that. he was in very firm territory in making that point. >> reporter: bernanke was firm in making another point. he called on congress and the president to replace the iedia sequester spendg cuts with a more gradual reduction in the deficit. but it doesn't appear anyone in washington is ready to take his advice. darren gersh, nbr, washington. >> tom: michael farr is the president of wealth management firm farr, miller and washington. he joins us from washington, d.c.
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>> tom: lots going on in that building behind you, michael. great to have you back. but more bond buying. do you support that? does the economy still need it? >> the economy probably still needs something in here, tom, yes. watch what happens wen bernanke pulls back. we know we'll see some head winds from sequestration, and we've got head winds from higher taxes. so, yeah, with all of the effort that the fed has made and with still close to a trillion dollars in deficit spending, we still only have 2% g.d.p. growth. >> tom: does this impact your investment strategy, your timeline knowing that the federal reserve is going to coine continued buying with both hands? >> not so much the timeline beuse we really try to bu things and hold them for a long time. it is really tough to judge the fundamentals because you don't know with all of this cash that is being created if you have organic cash or cash on hand to kind of fuel
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things. it looked like the market was going to pull back here over the past couple of days. it looked like it might have been overrolling this morning, but then ben bernanke came out and said i've got my foot to the floor, and boom, we went back up. >> tom: "arrogance creat incentives tha ives the stakes higher, lure us to play harder and induce us to expect more than ever before." is the federal reserve, as you heard the chairman lay out, feeding this arrogant cycle? >> i think absolutely. for them to take credit for non-inflation, when it is a sign of anemic recovery is pushing the envelope a little bit. i think, also, for people to begin to think that the fed is going to back stop this market any time it is going to go down and we can't lose, creas more and re danger in the marketplace. i think investors should pay close attention to
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balance sheets, cash flows, and be very careful. this feels very artificial to me. >> tom: while the chairman may not have been as bullish on continuing to buy bonds because of the two-day stock decline we saw recently, it certainly goes without saying, though, he was supportive of the economy, supportive of that strategy, and we saw the subsequent reaction in the stocks. >> and he said he didn't find stos overvalued at this poin he tught they were reasonably challenged. fed chairmans of years gone by said they didn't care about the stock market, sort of those people in wall street had to figure it out on our own. but he has commented several times in the past couple of years, bad stock prices, and what he wanted to see stock prices do, and how he is going to continue to keep interest rates low. it creates a risk environment, and that goes to the "too big to fail" which he says he wants to get away from, but he can't give us a plan on how he might do that. >> tom: you have a new
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book cming out "restoring our american dream." and you or prolific when it comes to these kind of books. in the meantime, we have a sequestration coming up. how are investors supposed to play this? >> the economics of trust are hugely important. in trusting societies, you have a more robust economy. we need to restore trust in washington and the banks. this book is really a very hopeful book. as investors look at this, we have to look for not only a fair playing field, but a solid playing field. one that can't b chged or shifting beneath us, either by tax policy or other new regulations that are going to change the game that we entered into. so somehow if you're going to commit the crime, you have to do the time. so culpability and consequence have to be reconnected. if you begin to see those things, i think you feel better as an investor. >> it is said we have given up common ground and
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instead it is stand your ground. we'll leave it there with michael farr in washington. >> disappointing. >> tom: always great to see u. >> it's an honor to be on with you, tom hudson. thank you. >> tom: thank you. >> reporter: i'm suzanne pratt. still ahead, fourth-quarter earnings are still trickling in, but already there may be reason for investors to fret about the first quarter. >> tom: also in the spotlight today-- positive data on the housing market. 2012 saw the best calendar-year growth in housing prices since the summer of 2006. a separate report shows new home sales rose almost 16% in january. erika miller reports on the outlook for the sector. >> reporter: the economic recovery is facing a number of headwinds, including a weak job market, high government debt, and rising prices at the pump. but you wont find the housing market on the list of economic woes. in fact, it's one of the few positives.
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>> earlier, when we had the recession a few years ago, housing was subtracting close to one percentage point off growth for the year. it looks like housing should contribute to gdp growth, something close to half a percentage point. >> reporter: home prices have been steadily recovering for about a year now. the s&p/case-shiller home price index posted a 6.8% gain last year. that's the biggest jump since 2005. what's even more encouraging is that the price gains were widespread throughout the nation-- 19 out of 20 cities posted increases. the lone exception was new york city, where prices dipped a half a percent. there was more data today reaffirming the housing market recovery. new home sales surged almost 16% in january, lotore an expected and the biggest jump in nearly two decades. so what's behind the turnaround in the housing market? >> the biggest factor is just
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the fact that prices have fallen to such a level that there are enough willing buyers that see value in this market to come in and basically provide a floor. >> reporter: in fact, investors continue to purchase about nearly one out of every five homes. many real estate experts predict home prices will continue to rise this year, fueled by a dwindling number of properties on the market. in january, the supply of homes for sale fell to its lowest level in nearly eight years. for most people, the biggest impediment to buying a home is not credit score or income. >> it's down payment. most people don't have enough spare cash laying around that they are able to qualify, given today's higher down payment requirements. >> reporter: typically, winter is the weakest time of year for the housing market. but this year may be different, thanks to tight inventories and strong demand. erika miller, nbr, new york.
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>> tom: the banking industry took a big hit during the financial crisis, but profits and bonuses are making a comeback. new york state measures wall street bonuses, and they have increased just as one of the biggest banks expects to cut its payroll in the coming months. ruben ramirez reports. >> reporter: firms that trade stocks at the new york stock exchange posted profits in 2012 that came in at just under $24 billion, one of the best years in the last two decades. and that's trickling down to bonuses. new york state comptroller tom dinapoli says cash bonuses paid to those who work in the securities industry are expected to be up 8% to $20 billion. >> for the jobs that are there, they're well-compensated. the average salary on the street
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is over five times the average private sector salary in the rest of the city's economy. so these are good jobs if you can get them. >> reporter: the average bonus is expected to come in at around $122,000. but good luck finding one of those jobs. j.p. morgan is the latest bank to announce it plans to slash at least 3,000 jobs, or a little less than 2% of its workforce this year. >> looking at 2013, our expectation is that there will still be downward pressure on headcount. >> reporter: dinapoli's office estimates every one job on wall street supports three jobs in other industries in the new york area. but while more job cuts could still be on the horizon for wall street, dinapoli says we're not likely to see the full extent of changes in the industry for at least another two years. >> wall street is an industry that is still transforming itself. we don't really know what the new normal is at this point, and i guess the one bit of good news, especially from a new york perspective, is that we saw healthier profits, bonus pool going up, and that certainly should help us in terms of revenues that the city and state
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were expecting from a tax perspective. >> reporter: whether you love or hate wall street, a lot of that bonus cash will most likely get pumped into new york's regional economy. ruben ramirez, nbr, new york. >> tom: jim senigal is the director of financial services at morningstar and joins us from a snowy blizzard chicago. is banking overemployed? >> i think to some extent it is. you know, i think it has been a really tough environment for the last few years. hard to make money with low rates and high credit losses. and banks are still dealing with the consequences o the financial crisi >>om: re we areso many years after the crisis, and j.p. morgan announcing the coming layoffs, is it late to the party? >> i think it is a little late to the party. you saw major restructurings, and wells fargo has the campus
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correction program, and j.p. had no announced a lot of job cuts. i think there is good news and bad news in some some of the job cuts are coming in the default servicing area. so the loans are getting better. but there is obviously some bad news in there. >> tom: speaking of that here, what does it tell you about the banking business in the year ahead, in the years ahead, if they're cutting back on payroll now? >> i think it tells us that the environment doesn't look like it is going to change any time soon. the banks have been talking for a couple of years now about growing the top line, and we haven't seen many signs of that. i think this is a sign that j.p. morgan, which has been probably the most optmistic of all of the big banks, is scaling back their expectations of profitability. >> tom: is itough to find profits in the banking business today? it doesn't seem like it, at least. >> it is getting a little easier, but it is still tough. i think consumers are still deleveraging. there is not a lot of
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willingness to take on new consumer debt. there is bright spots in mmercial lending and wealth management with markets being up, but it is tough for the banks to grow the top line. >> tom: of course the core business of any bank is lending money. new data from the fdic finds that cmercial and industalending w u 12% last year compared to a year earlier. small business loans, though, up just 4/10ths of a percent. what gives, jim? >> unfortunately, small business loans can be the riskiest loans. banks are under a lot of pressure not only from the regulatory costs, as j.p. morgan mentioned, but they're also under a tougher regulatory eye. it is very tough to take risks and get paid appropriately for it. i think you're si seeing that in wer bksare willing to lend. >> tom: in other words, the interest rates are too
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low for them to take on smaller businesses? >> exactly. with such good growth in loans to bigger businesses, it is tough to make the case you should take on the higher risk of a small business loan for maybe not much more in profitability. >> tom: but at least the profitability, the reward side, the banks are having an easier time of finding that the 60% of banks showing a higher net income twaird tot -- compared to a year earlier, so they're finding the profits. >> they're coming, but a lot has been from expense cuttings, layoffs is not a good place to find quality. they're able to release a lot of reserves over the last couple of years. so that is boosting the bottom line. >> tom: the business of banking, jim senigal follows it, he is with morningstar.
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>> tom: it pays to be on the higher end of the retail chain. department store giants macys and saks fifth avenue rang up better than expected profits in the holiday season. both companies also forecast further sales gains in 2013. but saks said investments in technology and e-commerce would pinch profits this year. as suzanne pratt reports, saks is one of many big companies already warning about first quarter earnings trouble. >> reporter: ask anyone on wall street what's fueled the stock market's recent rally and most will say the same thing-- corporate profits. fourth quarter earnings, reported by most u.s. companies in january, were stronger than expected. let's be clear-- they weren't huge numbers. but it's the element of
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surprise-- in this case, positive-- that matters most for stock investors. so here comes another surprise in the land of corporate scorecards. it looks like first quarter results will be pretty bumpy. we know this because companies are red-flagging their upcoming performance, a move known as guidance. >> so far, we've received 80 negative guidance and only 19 positive, which brings us to a negative-positive ratio of 4.2%. this is the weakest showing in over a decade. >> reporter: as a result, analysts have slashed q-1 earnings estimates. right now, s&p 500 firms are expected to enjoy only a 1.5% incase in profits. back in october, those same analysts were forecasting a more respectable 7% gain. it turns out several factors are behind corporate america's changing profit picture. >> in addition to the typical reasons, which is worries in europe, we're also seeing that companies are citing
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restructuring related costs, also the government spending cuts, and even consumer spending slowdown because of weaker paychecks. >> reporter: so what does a far less pretty earnings outlook mean for e stock market stil teetering close to record highs? market pros say investors won't be shocked by ugly earnings. >> i think the market is fully expecting a year of very slow earnings growth. if we had a big downside surprise, like let's say earnings were down 10% for the quarter or something like that, now that's a different story. the market would trade off on that. but i don't think that's going to be the case. >> reporter: right now, analysts expect companies will deliver decent profit performance in q-2. even better numbers are expected in the sond half of this year. of course, that's a long way off. suzanne pratt, nbr, new york. >> tom: stocks caught a bid today on the heels of earnings from home depot and macy's.
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hearing the federal reserve boss talk about continuing to support the economy also helped. the s&p 500 rallied at the opening bell after the early earnings reports and housing data, then waned mid-morning to hit its lowest point of the session just before noon. the market rallied this afternoon to finish higher by six tenths of 1%. volume was 771 million on the big board; just under 1.9 billionraded on the sdaq the marial and conser discretionary sectors gained at least 1%, followed by energy, up nine tenths of 1%. home depot added to the enthusiasm over housing with a strong fourth quarter earnings report. the retailer earned 67 cents per share, up from a year ago and better than estimates. in addition to the general improvement in the housing market rebuilding from super- storm sandy, an extra week in the fourth quarter compared to a year ago helped. shares jumped 5.7%. volume increased four fd. the gains came even though its finci forecast w weer than anticipated. the c.e.o. called the recovery a "gradual thawing process." the company also increased its dividend and announced a stock
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buyback plan. we have a closer look at home depot's stock chart. it's on our web site, look for the "blogs" tab and technical analysis from michael kahn. competitor lowe's got a lift from home depot's results. lowe's shares rallied 2%. yesterday's lowe's reported its own better than expected fourth quarter results. home depot plus stronger new home sales and home price data added up to a return of some opmism for homebuilding stocks. the homebuilding ctor haseen some profit-taking this week after a big rally over the past year, but today, the sector exchange traded fund rebounded 3%. among the largest builders by market value, pulte group was up 5.7%, d.r. horton gained 4.1%, and lennar added 3.7%. despite the housing recovery, house wares was one of the weakest categories for department store macy's. still, it saw a lot of green over the holidays. with sales strength from handbags, shoes, men's and women's clothing, macy's earnings were up from a year ago and better than forecast.
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shares gained 2.8% with its guidance coming in higher than expected by wall street analysts. leading the materials sector was cleaning services company eco- lab-- a strong earnings report helped, sending shares higher by 4.2%. that pushed the stock to an all- time high. a stock to watch tomorrow will be, thanks to a very strong fourth quarter. results were significantly above a year ago, and well ahead of wall street estimates. the travel web site saw particular strengthrom its intnational biness. after finishing the regular session up 1%, shares gained another 3% in extended hours trading. three of the five most actively traded exchange traded products were higher. the s&p 500 volatility note and the leveraged volatility note each fell. and that's tonight's "market focus."
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jail time and play time. a for-profit prison operator's sponsorship of a college football stadium in florida is attracting plenty of attention, just not the kind the company probably had hoped for. and it could turn into an expensive black eye for investors. here's rick horrow with tonight's "beyond the scoreboard." >> reporter: two of the primary reasons companies put their names on sports stadiums are to increase awareness and drive sales. since buying the entitlement at florida atlantic university's new football stadium for $6 million over 12 years, the florida-based geo group, an operator of for-profit prisons, has received almost universal criticism and demonstrated no plan to increase revenue.
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the agreement is being categorized as a gift from geo group, whose founder is a f.a.u. alumnus and former chair of the school's board of trustees. f.a.u.'s athletic department says it will use the money to balance its budget. while what amounts to an annual $2 million donation to the school is a noble gesture, geo group, as a publicly traded corporation, should have considered the impact this deal would have on its shareholders. late-night talk shows have made a mockery of the sponsorship of a prison operator securing a college sports stadium, and the powerful aclu lobby has called on the school to rescind the deal. hardly the return on investment, or in this case, return on donation, geo group hoped for. i'm rick horrow. >> tom: tomorrow on nbr: retail results continue, most notably from j.c. penney. we will get a better look at if the company's turnaround plan is helping its bottom line.
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and are you an investor or a trader? we'll talk about the difference is, and why it matters, when we hear from legg mason investment's robert hagstrom. first, "video killed the radio star" with mtv in 1981. then, it seemed the internet and music downloads would kill music sales. but the business broke a 12-year losing re in 2012. music industry revenues rose three tenths of 1% to $16.5 billion. that's nothing like the music industry's peak hit back in 1999 when annual sales neared $29 billion. and the best selling album last year? adele's "21". that's "nightly business report" for tuesday, february 26. have a great evening, everyone. we'll see you online at, and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh
4:58 pm >> join us anytime at there, you'll find full episodes of the program, complete show transcripts and all the market stats. also follow us on our facebook page at bizrpt. and on twitter @bizrpt.
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